(Bloomberg) — Shuai Yuan wants to help all the hunched-up grannies in China stand tall again.
The former banker worked on the 2010 initial public offering of a Chinese maker of hip implants as a summer associate at Morgan Stanley and went on to see that company acquired for more than double the value. Now an entrepreneur, he’s seeking to capitalize on the shortfalls of China’s public hospital system and surging demand from those seeking care for creaking knees and fractured hips.
While expansion by Chinese companies now owned by Medtronic P.L.C. and Stryker Corp. helped increase access to orthopedic products over the past decade, getting medical care for a bad hip still takes months, and many of China’s elderly simply choose to live in pain. Spotting an investment opportunity, private-equity groups, former bankers and international health care firms are swarming in.
“It’s rare to have a Western mainstay that somebody else didn’t already bring to China,” said Yuan, a Yale graduate. “You don’t find many untapped opportunities like this anymore.”
Investors are being drawn partly by government efforts to encourage private investment in health care. China also has more than 100 million elderly people — a number set to double in the next three decades.
This demographic group tends to have more brittle bones, and hunched over elderly women and men are a common sight on city streets. The Chinese orthopedic device market expanded 22 percent to 9.2 billion yuan ($1.5 billion) in 2014 from a year earlier, market survey firm Huidian Research estimates.
Columbia Pacific Management, a Seattle-based health care investment firm, just acquired a 200-bed orthopedic hospital in Shanghai’s Pudong District — and is building others. Bee Lan Tan, president of Columbia Pacific’s China hospital business, points out that public hospitals are so busy that they can sometimes discharge patients early to make room for others.
“The Chinese perception is, if you are going to go under the knife, you want the best,” Tan added. “So we see an opportunity to provide an alternative.”
Yuan, 26, was part of Morgan Stanley’s private-equity team hunting for Chinese hospital assets until March, when he founded a rehab hospital operator group with Albert Xu, who had been in a similar role at Blackstone Group.
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